Officials say the decision was taken after several years of discussion about how to prevent neo-Nazi interest.
Hitler was born in the house in the town of Braunau am Inn in April, 1889.
The property has been leased from its owner by the government since 1972, and it was used for many years as a centre for people with disabilities.
But it fell empty in 2011 following a dispute between the government and the owner, Gerlinde Pommer, who refused to grant permission for renovation.
The new plan would include an offer of compensation from the state to her, interior ministry spokesman Karl-Heinz Grundboeck told AFP news agency.
"We are currently examining the creation of a law, which would force a change of ownership and pass the property to the Republic of Austria.
"We have come to the conclusion over the past few years that expropriation is the only way to avoid the building being used for the purposes of Nazi [sympathisers]."
He did not say what the government might then do with the property.
The house is unmarked and the only link to its past is a stone outside inscribed with the words: "Never again Fascism. In memory of millions of dead." Hitler's name does not appear.
Various proposals have been put forward about how to use the house, including turning it into flats, a centre for adult education, a museum or a centre designed to confront the Nazi past.
There have also been calls for its demolition, with one Russian MP offering to buy the house and blow it up.
Hitler went on to rule Nazi Germany from 1933 until his death at the end of World War Two in 1945.